This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Wall Street is down after plunging 800 points in a single trading day. The fall is sparking fears of an economic slowdown.
The US-China trade trouble
While the US stock market soared on the news of a possible US-China trade truce, the delay in implementing the deal is worrying investors. The two nations promised that they wouldn’t impose additional tariffs on each other’s imports until January. However, neither side has given specifics on the agreement, sparking scepticism that the pact will even be honored. US President Trump also added further doubt when he tweeted that if future negotiations don’t go well, he’ll become a ‘Tariff man.’
Yield curve worries
Wall Street and the US dollar are also struggling because of the inversion of the yield curve.The yield on three-year US government debt is more than the interest rate on five-year debt. That has usually been a sign that investors have more faith in the economic situation now than in the future. The inverted curve has previously come before recessions, which is worrying investors.
Art Hogan, chief marketing specialist at B.Riley FBR, noted that both the US-China trade impasse and the inverted yield curve have contributed to Wall Street’s struggles.
‘No good deed goes unpunished. As we get headwinds from trade worries fading, you get an inverted yield curve and another brick added to the market's wall of worry,’ said Hogan.
.jpg)
